Employment Law Case Update - September 2014

Burnetts' team of employment law solicitors examine the latest case law developments.

TUPE and Change of Location

Regular readers of this bulletin will already be aware that changing terms and conditions or working practices after a transfer of a business or service which is protected by the Transfer of Undertakings Protection of Employment Regulations (TUPE) is fraught with difficulty but in some cases, it is a necessity.

The recent case of Centinsoy v London United Busways Limited is good example of a case in which such a change was required and upheld by the courts.

The case involved a group of bus drivers who had been working for CentreWest operating out of a depot at Westbourne Park. Their employment contracts contained mobility provisions under which CentreWest could ask the drivers to work out of one of 5 CentreWest depots including the Westbourne Park depot.

CentreWest lost a contract. The new provider, London United Busways, decided to operate out of Stamford Brook depot rather than Westbourne Park. This would add an extra 30 minutes or more of commuting time for most of the drivers who transferred to London United Busways pursuant to TUPE. Some of the drivers (including Mr Centinsay) resigned claiming constructive unfair dismissal and unfair dismissal pursuant to regulation 4 (9) of TUPE which allows an employee to resign if changes are imposed which are to the employee’s material detriment.

The Employment Tribunal which considered the case in the first instance held that, because there had been a mobility clause in the original contracts of employment, London United Busways was not asking the transferred staff to do anything which couldn’t have been asked of them by CentreWest. The move was not therefore a fundament breach of contract allowing the employees to resign and claim constructive dismissal. The Tribunal also decided that the extra commuting time was not substantial and so was not a material detriment.

The drivers appealed arguing that the decision was perverse and contrary to existing case law. However, the Employment Appeal Tribunal (EAT) concluded that whether a particular condition was a material detriment was a question of fact and that there was nothing to suggest that the Tribunal in this case had approached the question incorrectly. It was open to the Tribunal to decide, after full consideration of the facts presented, that there had not been any detriment.

Whilst this is a welcome decision, it is fact sensitive. To succeed with arguments of this nature, the employer has to persuade the Employment Tribunal that the changes being implemented after the transfer are not so significant or detrimental so as to give grounds for a claim. It is also often a question of the procedure followed prior to implementation of the changes. Employers who are looking at implementing changes after a TUPE transfer should contact Natalie Ruane at Burnetts Solicitors on 01228 552222 to discuss the risks arising from any proposed changes and how those risks can be minimised.

Binding Pay Increases

What if a contract states that pay increases are discretionary but pay increases are always awarded? Does this make the increase contractual? Not necessarily, concluded the EAT in the case of the Equality and Human Rights Commission (EHRC) v Earle. The EHRC had included in its employment contracts a clause which stated that salaries would be reviewed annually and, at the absolute discretion of the employer, would be increased subject to the employee being able to demonstrate that he or she had reached a number of targets including satisfactory performance.

Due to budget constraints, the EHRC decided not to award pay increases to any staff. A claim was brought by Ms Earle arguing that the decision was a breach of contract.

The Employment Tribunal which first considered the matter agreed with Ms Earle. They felt that the lack of the use of discretion in the past (employees had received the increase if performance was satisfactory) had changed the terms. The Employment Tribunal was also persuaded by the fact that the Ms Earle had received assurances that her pay would be increased by one of EHRC’s HR officers – Ms Earle had met her targets so, under EHRC’s normal practice, she would have been awarded the increase.

EHRC appealed and, in a good decision for employers, the EAT decided that, contrary to what had been said by the Employment Tribunal, the focus should be on the written terms. The EAT felt that the comments of the HR officer couldn’t be said to override the discretion which the employer had reserved for itself within the contract. Such discretion meant that, even where all of the criteria set had been met, the employer could still withhold the pay increase without breaching the contract.

Although employers can take some comfort from this decision, it is always worth remembering that contractual terms can change over time due to the actions (or omissions) of the parties. Any employer who is challenged on the meaning of a contractual term or its implications should take advice. Natalie Ruane at Burnetts Solicitors would be happy to help with any such interpretation issues. She can be contacted on 01228 552222 or by email at nr@burnetts.co.uk.